Umbrella employee or your own company? How to choose correctly
Compare umbrella employment with a sole proprietorship and a limited company: tax, administration, costs and security – and when each option pays off.
Short summary
- Umbrella employment means you invoice without a company and receive payment as a salary, with tax and social security contributions already handled.
- Your own company gives more control and more deduction opportunities, but requires bookkeeping, tax declarations, and your own payments to the Swedish Tax Agency (Skatteverket).
- Umbrella employment is best suited for those who invoice irregularly, test an idea, or want to avoid administration.
- With Pay2me, the account costs nothing – you only pay 1.95–5.95 percent of the invoice amount when you invoice.
The question arises as soon as the first assignment lands: should I start my own company or can I invoice without a company? Both paths are fully legal and used by thousands of Swedish freelancers. The difference lies in how much administration you want, how often you invoice, and how much control you want to have yourself.
How umbrella employment works
As an umbrella employee, the company you invoice through becomes your employer for the assignment. You find and price the assignment yourself, but the invoice is issued in the umbrella employment company's name. When the customer pays, the fee, employer contributions, and preliminary tax are deducted, and the rest is paid out to you as salary. Therefore, you don't need F-tax registration, an organization number, bookkeeping, or a VAT declaration.
What is sometimes referred to as invoicing without a company is precisely this: you use someone else's legal entity for invoicing and receive a salary instead of business income.
How your own company works
With a sole proprietorship or limited company, you are solely responsible for the entire chain: F-tax registration, ongoing bookkeeping, VAT reporting, employer declarations if you pay yourself a salary, and an annual tax declaration. In return, you can deduct more expenses, plan withdrawals over the year, and build a company with your own brand.
What does it actually cost?
Umbrella employment costs a percentage fee per invoice. Your own company, however, has fixed costs: accounting software or an accounting consultant, potential auditing, and registration fees. For a few invoices per year, the variable fee is almost always cheaper. With high and consistent turnover, your own company usually becomes more cost-effective.
Security, insurance, and certificates
As an umbrella employee, you receive a salary, which provides sickness benefit qualifying income, pension qualifying income, and the opportunity to obtain employer certificates. The assignments are covered by the umbrella employment company's liability insurance. As a self-employed entrepreneur, you must arrange your own insurance and keep track of how your income affects benefits from Försäkringskassan.
Which option suits you?
Choose umbrella employment if you invoice sporadically, want to test a business idea alongside employment, work within ROT and RUT, or simply want to dedicate your time to assignments instead of administration. Choose your own company if you invoice a lot every month, have large deductible expenses, or want to build a company with employees.
Many start as umbrella employees and only start a company when the volume justifies the administration. It's perfectly fine to combine: you can be an umbrella employee for some assignments and have your own company for others.
Umbrella employee, sole proprietorship or limited company
An overview of the practical differences. Rules may change – always check current amounts and requirements with the Swedish Tax Agency (Skatteverket) and the Swedish Companies Registration Office (Bolagsverket).
| Umbrella employee with Pay2me | Sole proprietorship | Limited company | |
|---|---|---|---|
| Start | Create an account with BankID, ready the same day | Register for F-tax with the Swedish Tax Agency (Skatteverket) | Register a company and deposit share capital |
| Bookkeeping | None – we handle it | You are responsible | You are responsible, higher requirements |
| VAT and tax | We declare VAT, deduct preliminary tax, and pay social contributions | You declare and pay yourself | You declare and pay yourself |
| Tax return | Regular employment income, pre-filled | NE supplement | Income tax return 2 and annual report |
| Cost | 1.95–5.95% per invoice, no account or monthly fee | Accounting software or consultant | Accounting, audit, fees |
| Payout | Salary directly when the customer has paid | When you withdraw money yourself | Salary or dividend according to your own arrangement |
| Deductions | Expenses linked to assignments | Broad right to deductions | Broad right to deductions |
| Suitable for | Irregular invoicing, side projects, ROT and RUT services, those who dislike administration | Regular business activities | High turnover, multiple employees |
This comparison is general and does not replace advice in your individual case.
Frequently asked questions about umbrella employment and running your own business
Try it without starting a company
Create a free account with BankID and send your first invoice today. You only pay when you invoice.
Skapa kontoTry it without starting a company
Create a free account with BankID and send your first invoice today. You only pay when you invoice.
Skapa kontoMarkus Aglander
Founder
Writer at pay2me focusing on invoicing, finance and self-employment.